Samsung Electronics Co. Ltd. is actively pursuing a plan to take over or buy a significant stake in BlackBerry Ltd., despite statements from both companies this week denying that such a plan may be in the works, the Financial Post has learned.

A document obtained by the Financial Post, prepared for Samsung by New York-based independent investment bank Evercore Partners, outlines the case for, and the potential structure of a possible purchase of BlackBerry.

The document was prepared in the last quarter of 2014, but a source familiar with the matter said that Samsung still remains very interested in acquiring all or part of BlackBerry for the right price.

“I can tell you Samsung is contemplating a purchase,” said the source, who asked to remain anonymous because of the sensitive nature of the talks. “It’s still being pursued right now. Samsung is still evaluating their options. So it’s still very much an open deal.”

BlackBerry shares jumped more than 7% in New York and Toronto on Thursday.

BlackBerry and Samsung both declined to comment.

On Jan. 14, a Reuters story reporting Samsung and BlackBerry were in talks regarding a US$7.5 billion takeover offer set the market abuzz. BlackBerry shares rose 30% to close at US$12.60 on the NASDAQ, their highest level since 2012.

Later that day, BlackBerry denied the report, saying in a statement: “BlackBerry has not engaged in discussions with Samsung with respect to any possible offer to purchase BlackBerry.” That sent the company’s stock back 18% to US$10.30 the following morning.

It’s still being pursued right now. Samsung is still evaluating their options

On Monday, J.K. Shin, Samsung’s co-chief executive, told The Wall Street Journal that his company is in talks to use some of BlackBerry’s technology in the South Korean company’s devices, but is not interested in an acquisition. “We want to work with BlackBerry and develop this partnership, not acquire the company,” the newspaper quoted Mr. Shin as saying.

According to the source, Samsung was caught off guard by the Reuters leak after hoping it could move in quickly on BlackBerry, with an attractive enough premium over the Waterloo, Ont.-based mobile technology company’s share price that BlackBerry would quickly agree to a deal, saving a drawn-out and difficult bidding process.

THE CANADIAN PRESSGeoff Robins

Samsung “wanted to send a message to Apple and Microsoft [and] Nokia,” said the source. “[They] wanted to know: What can we pay them, what is a price we can offer [BlackBerry] that we won’t feel embarrassed by … BlackBerry bluffing or simply backing out of a price?””

Instead, BlackBerry appears to have learned of the price Samsung was hoping to pay through the Reuters leak, before the company could make a formal offer. “This is the sort of thing we wanted to avoid,” the source said.

The Evercore Partners document identifies BlackBerry’s suite of software products as appearing “complementary to Samsung’s service platform,” and points to the advantages that BlackBerry’s products and services, including its BES12 servers, could provide Samsung in better penetrating the enterprise market. That is a segment where Samsung, whose devices are based on Google’s Android operating system, has lately been focused on increasing its comparatively weaker market share. Last summer, Apple Inc. teamed up with IBM Corp. to develop a suite of iPhone and iPad “enterprise apps” specifically targeted at grabbing more corporate and government customers away from BlackBerry.

What can we pay them, what is a price we can offer [BlackBerry] that we won’t feel embarrassed by

The document outlines the pros and cons of various approaches Samsung could take in securing BlackBerry. One proposed scenario has Samsung acquiring a minority share in the company, which the document says might help secure regulatory approval from western governments nervous about foreign ownership of BlackBerry’s integral security features.

Michael Nagle/Bloomberg

The document also raises the possibility of trying to bring Prem Watsa, the CEO of Fairfax Financial Holdings, a major Canadian shareholder of BlackBerry, on board to pull the deal together. The document suggests making an offer of US$13.35 to US$15.49 per share, reflecting a valuation of between US$7 billion and US$8 billion. BlackBerry shares closed Wednesday at US$9.93 on the NASDAQ.

“We believe that at the upper end of that US$15 price, Prem Watsa is going to be very supportive of this deal,” the source said.

The document also paints a bright picture of BlackBerry’s revenue potential in the near future. A chart compiling analyst estimates predicts the company’s hardware revenue will stabilize and that its software revenue will come close to tripling from US$235 million in 2014 to US$636 million in 2017.

Since Mr. Chen has almost certainly run those same numbers himself, the challenge for any potential buyer is offering a valuation that betters what BlackBerry believes it can accomplish in time on its own. “In five years, [BlackBerry] thought the return on their turnaround strategy as implemented by John Chen was going to do better than the cash they will be receiving today … That assumption by BlackBerry scared Samsung,” the source said.

Still, the source maintains that Samsung is still keen on making a deal happen. The talk earlier this week about Samsung extending its cooperation with BlackBerry, which was notably lacking in specifics, is “just setting it up,” the source said. “Samsung hasn’t walked away” from an acquisition. “They’re leaning towards it.”

With the current threat landscape making businesses vulnerable to cyber attacks and data breaches, it’s no wonder that companies are looking to spend more on security. Worldwide spending on security ...

Comments

Postmedia is pleased to bring you a new commenting experience. We are committed to maintaining a lively but civil forum for discussion and encourage all readers to share their views on our articles. We ask you to keep your comments relevant and respectful. Visit our community guidelines for more information.